Dennis Brouwer, General Manager, Converged Cloud and Global Network Solutions for Savvis, admits he's still a relative newcomer to the cloud and hosted services game, having joined the company in May 2008. Following CenturyLink's (NYSE: CTL) acquisition of Savvis last year, Brouwer was tasked with tying together the data center world of Savvis with the WAN worlds that CenturyLink brings to bear from its own legacy operations and its acquisition of Qwest Communications. A key goal of Savvis is to move up the stack into managing applications for business customers. Sean Buckley, FierceTelecom's Senior Editor, caught up with Brouwer recently to talk about the integration of Savvis into CenturyLink's fold and the trends taking place in the data center and cloud services market segment.
(This interview was featured in our latest eBook, The New Data Center. Download your copy today.)
FierceTelecom: The data center market seems to be on an upswing. What's driving the build out of new data centers and overall market growth?
Dennis Brouwer: We're absolutely seeing strong demand in the data center industry for that range of what I like to call converged cloud offerings. The range on one end is fully public: this is an application that I will put on a very robust public site that serves an identified community that can get to me from anywhere. On other the other end it's a completely internal application with a perfectly circumscribed set of users who are carefully vetted and are usually employees that are inside the firewall and are hitting virtualized applications that happen to sit inside a Savvis data center. A lot of what we're seeing is in the big center of the bell curve where companies say: 'we have applications that we have traditionally done in my data center. We need to put them in one or more than one Savvis data center because of the regionalized requirements. I may have a mix of constituents that need to get to these applications: some are internal and are going to be carefully guarded and privatized and some are extranet communities, and there's growth in the public applications.' We're just seeing enterprises take a fresh look how they want to support their applications going forward. Once they take that approach, the value proposition around a virtualized data center experience combined with a virtualized network experience resonates very well.
FT: You mentioned you have your foot in both the Savvis and the legacy Qwest door. How has the integration process of Savvis into CenturyLink gone so far?
DB: It's really been interesting to be a part of it. From my perspective, it's been an extension of what my group was responsible for prior to the acquisition by CenturyLink. If you go back several years ago, the Savvis network business looked like a traditional carrier business. We did not do voice, but we had wholesale, IP transit, and we sold VPNs. Over the last two years or so we moved away from that and embraced the niche of being a provider of data center connectivity. Over the past year what we have said is that rework of the company is still valid, but it needs to have a broader scale. One of the things we started to focus on after the acquisition closed last July was all of the interconnectivity between all of the broad network assets of CenturyLink--most of which from our perspective at this point are legacy Qwest—tying that infrastructure into what we call the Hosting Area Network that exists in our data centers. From a product perspective what that means [is] we have built in Q-Wave, E-Line, and IQ services into our data centers. We have built the ability for an EMG sales person to sell that to their customers and place an order through their existing contract vehicles. Of course, the value to our enterprise customer is they got in many cases a huge legacy Qwest network installed and Savvis' data center services (i.e., cloud, data center and colocation) are just a hop away. You set up another spoke off their existing network and they have access to those services around the world. There's a lot of system work being done behind the scenes, which is the legacy of multiple acquisitions, but from a product and customer value perspective we have focused on broader CenturyLink connectivity with a full suite of Savvis data center services.
FT: Do you think that global reach is a differentiator Savvis brings to the table?
DB: We think that it is. Basically that was the value proposition that was put out there at the time the acquisition was announced. The quote was that this acquisition will bring together an unprecedented amount of data center and network assets. I like to say, never underestimate the value of simply doing what you say what you would do. I will say that we think there's a whole other layer of value that once you have that integrated infrastructure—both network and data center--and it is global, you now have a base to do a lot of things. You can build out services which are close to infrastructure, like managed security, and we're announcing other things around that this year. Contact center is another one. These are communications services where you have pull-through voice and data that can be hosted in Savvis centers. We think that that integrated global infrastructure will allow us to move higher up the stack if you will and add more Software as a Service (SaaS)-type applications. Some of those we'll own and some of them we'll partner for, and some will be companies that will use our infrastructure to deliver application services to their customers.
FT: What's the popular mix of services that Savvis is taking to its customer base?
DB: If you start from the bottom up, we have the full suite of connectivity services: Layer 1 wave services, Layer 2 Ethernet services, and then Layer 3 IP services. Those IP services can be private, which is done over our MPLS network. They can be public Internet services, which we can deliver through the legacy Savvis tier 1 backbone or the legacy Qwest Tier 1 network. On top of that is where you find traditional Savvis services like hosting, colocation, and cloud. You also find other traditional network services such as managed network services, security services, voice services (i.e., VoIP and traditional POTS voice), and contact center services. There's also a whole wrath of additional services buried inside Savvis including managed database services, etc.
FT: There are a lot of elements of the cloud: private, hybrid, and public. What are the differences in your mind and the overall market opportunity?
DB: It seems to vary by industry. I would say industries like media are very aggressive about developing public-facing cloud personas. At the other side of the spectrum you have financial services, where privacy and security are more important. They are less likely to move to a public cloud infrastructure, but they're very interested in cloud infrastructure just because of the efficiency cloud brings. We really see a broad mix that varies by customer. Some customers say they will do everything public cloud, while others will say they would never take their data there in a million years. Of course, that means that in two to three years they will be willing to consider it. There's that big center of customers in the middle of the bell curve that are saying, 'I've got this app that's appropriate for public, and this other app that I'll keep in a Savvis data center or keep in my data center for another year and move into the Savvis center.' We see lots of activity there. For someone like me who has been in the data communications industry at this point, I started out with X.25 switching, went to Frame Relay and then ATM, all of which are virtualized technologies. Similarly, there's a very natural progression around the adoption of virtualized compute and virtualized storage.
FT: Obviously, Savvis is focused on the large MNC customer, but do you see your services having applicability with CenturyLink's small to medium business (SMB) customers?
DB: It's a good question. Savvis pushed very hard in the enterprise space. We continue to push in that space, and we're addressing that through the Savvis sales and market organization and also taking those Savvis products through what was really the legacy Qwest sales organization that's now part of EMG. However, we've also been able to modify the Savvis cloud services so they're appropriate for that small and medium business. We're finding that's a very attractive offering there largely driven by two things: the reluctance of businesses to commit capital to infrastructure; and the second is the reluctance of businesses to hire technical expertise to run that hardware and software once they get it in house. They are very interested in cloud, and they're not stuck in owning it themselves, and that's what is resonating in the SMB space. There are initiatives within CenturyLink and Savvis to drive that at the small business opportunity.
FT: You made recent expansions in the United States, Europe and Asia's data centers. What drove those expansions?
DB: It's driven by two things. One is there's demand in those markets. What's a little surprising to people is that Savvis is a billion-dollar company. Savvis has a very active sales and marketing effort, not just in the U.S., but also in Asia and Europe. We have sales teams that are responding to demand in those markets from regional players and enterprises looking for the services that we provide. The second thing is that as we engage with global enterprises, they are looking for a globally consistent solution. That drives us to invest in not only areas of the U.S., but also areas around the world that provide that globally consistent footprint and solution to those customers.
FT: Besides the data center expansion, Savvis also purchased Ciber's Global ITO assets. How does this enhance your service and product portfolio?
DB: If you look at what we're doing overall, we're interested in moving up the stack, and moving up the stack can mean bundling in other applications. In many cases, what it means is having the ability to go into an enterprise environment and be able to develop and understand at the application level. The customers I like best are the ones who say. 'I am focused on the application and you need to give me this service level and you tell me how to do that.' If we can now go into a customer environment with the extra eyes, hands and brains that come along with this acquisition, penetrate these enterprise accounts, and do a better job at understanding the enterprise application requirements, it makes it easier for us to adapt our virtualized infrastructure to that enterprise's needs. Secondly, as we develop that application understanding, it helps to drive our Savvis and CenturyLink product roadmap. In other words, what additional managed services should we be developing based on perceived and observed enterprise demand? I'd say the bottom line is it brings other round of IT outsourcing expertise to Savvis and it's going to help us move up the stack to better serve our customers at the enterprise application layer.
FT: Over the past two years alone, there have been a lot of large acquisitions in the data center space, including CenturyLink's deal to acquire Savvis. What's your take on the ongoing consolidation of the data center space players? Is it making it a more competitive segment?
DB: I would say it's definitely competitive. It falls into the general category that any prize worth having is worth fighting for. What you tend to see with high-tech investments is if you have a growth, new players are going to enter that market. We're seeing regional local players that might set up a data center and sell space and power. We see that in regional markets. Our chosen playing field is really not that. It's being able to provide that full breadth of solutions to the medium-sized enterprise and larger who find value in having globally integrated infrastructure. I guess the bottom line is it's competitive, but there's only a few players that can bring the kind of infrastructure we're talking about globally to bear.
FT: Does the combined company bring more revenue opportunities that they could not see on their own as separate companies?
DB: What I have seen is when a network company buys another network company, you drive for cost synergies. You hammer your infrastructure together and you cut your cost per bit down. When you combine companies that are in dissimilar but complementary markets, you drive for revenue synergies. If you look at the combination of Savvis and CenturyLink, there are cost synergies, but what makes it exciting for people inside the company is there's so much revenue upside. In talking with a group inside Savvis and inside CenturyLink, I have said we could do this thing that independently we could never do. That's the great thing about this kind of acquisition in that those kinds of opportunities are out there.
(This interview was featured in our latest eBook, The New Data Center. Download your copy today.)